[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24276-24280]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09626]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69397; File No. SR-NYSEArca-2013-18]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment No. 1 
Thereto, To List and Trade Fourteen Series of the iShares Trust Under 
NYSE Arca Equities Rule 8.600

April 18, 2013.

I. Introduction

    On February 14, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of fourteen 
series of the iShares Trust (``Trust''). The proposed rule change was 
published for comment in the Federal Register on March 6, 2013.\3\ The 
Commission received no comments on the proposal. On April 2, 2013, the 
Exchange filed Amendment No. 1 to the proposed rule change.\4\ This 
order grants approval of the proposed rule change, as modified by 
Amendment No. 1 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 69008 (February 28, 
2013), 78 FR 14600 (``Notice'').
    \4\ In Amendment No. 1, the Exchange clarified that the variable 
rate demand notes that may be purchased by the Funds (as defined 
herein) would be backed by a letter of credit from a highly rated 
bank or financial institution that meets certain credit standards 
and that the Funds would purchase such variable rate demand notes 
with hard one or seven-day put options. In addition, the Exchange 
clarified that the net asset value (``NAV'') for the iShares New 
Zealand Dollar Cash Rate Fund would be determined on each business 
day as of the value date roll-over in New Zealand, which would 
ordinarily be 7:00 a.m., New Zealand time (which would be 1:00 p.m., 
2:00 p.m., or 3:00 p.m. Eastern Time or ``E.T.'' the prior day, 
depending on daylight savings time). The Exchange further clarified 
that fair value determinations would be made in accordance with the 
requirements of the Investment Company Act of 1940 (``1940 Act''). 
Finally, the Exchange made a number of technical changes to the 
proposed rule change. Because the changes made by the Exchange in 
Amendment No. 1 do not materially alter the substance of the 
proposed rule change and do not raise any novel or unique regulatory 
issues, Amendment No. 1 is not subject to notice and comment.
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares of the iShares 
Australian Dollar Cash Rate Fund; iShares British Pound Cash Rate Fund; 
iShares Canadian Dollar Cash Rate

[[Page 24277]]

Fund; iShares Chinese Offshore Renminbi Cash Rate Fund; iShares Euro 
Cash Rate Fund; iShares Japanese Yen Cash Rate Fund; iShares Mexican 
Peso Cash Rate Fund; iShares New Zealand Dollar Cash Rate Fund; iShares 
Norwegian Krone Cash Rate Fund; iShares Singapore Dollar Cash Rate 
Fund; iShares Swedish Krona Cash Rate Fund; iShares Swiss Franc Cash 
Rate Fund; iShares Thai Offshore Baht Cash Rate Fund; and iShares 
Turkish Lira Cash Rate Fund (each, a ``Fund'' and, collectively, the 
``Funds'') under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares on the Exchange. The Shares 
will be offered by iShares Trust, a statutory trust organized under the 
laws of Delaware and registered with the Securities and Exchange 
Commission as an open-end management investment company.\5\
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    \5\ The Trust is registered under the 1940 Act. On August 9, 
2012, the Trust filed with the Commission a post-effective amendment 
to Form N-1A under the Securities Act of 1933 and the 1940 Act 
relating to the Funds (File Nos. 333-92935 and 811-09729) 
(``Registration Statement''). The Commission has issued an order 
granting certain exemptive relief to the Trust under the 1940 Act. 
See Investment Company Act Release No. 29571 (January 24, 2011) 
(File No. 812-13601).
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    The investment adviser to the Funds will be BlackRock Fund Advisors 
(``Investment Adviser''), an indirect wholly-owned subsidiary of 
BlackRock, Inc. BlackRock Investments, LLC, an affiliate of the 
Investment Adviser, will serve as the distributor for the Funds. State 
Street Bank and Trust Company will serve as the administrator, 
custodian, and transfer agent for each Fund. According to the Exchange, 
the Investment Adviser is affiliated with multiple broker-dealers and 
has implemented a ``fire wall'' with respect to such broker-dealers 
regarding access to information concerning the composition and/or 
changes to the Funds' portfolio.\6\
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    \6\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the 
event (a) the Investment Adviser or any sub-adviser becomes newly 
affiliated with a broker-dealer, or (b) any new manager, adviser, or 
sub-adviser becomes affiliated with a broker-dealer, it will 
implement a fire wall with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to 
the portfolio, and will be subject to procedures designed to prevent 
the use and dissemination of material, non-public information 
regarding such portfolio.
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Summary of the Funds

    Each Fund generally will seek to provide its shareholders a daily 
return that reflects: (i) The increase or decrease in the exchange rate 
of the foreign currency identified in its name (``FX Base Currency'') 
against the United States dollar; and (ii) the yield of the FX Base 
Currency, minus the Fund's fees and expenses. ``Yield'' refers to the 
yield an investor would expect to receive if they invested in an 
overnight or similar cash or cash equivalent investment denominated in 
the FX Base Currency. Each Fund also will seek to preserve liquidity, 
and maintain stability of principal and preserve capital, as measured 
in the FX Base Currency.
    According to the Registration Statement, each Fund will be an 
actively managed exchange-traded fund that will seek to achieve its 
investment objective by investing, under normal circumstances,\7\ 
substantially all of its assets in short-term securities denominated in 
United States dollars and a matching notional amount of spot foreign 
exchange contracts (generally required to be settled within two 
business days) to purchase the FX Base Currency (against delivery of 
the United States dollar). Under normal circumstances, there will be a 
1:1 ratio between the fixed income securities and spot contracts. The 
strategy of combining investments in short-term fixed income securities 
and spot foreign exchange contracts is designed to provide financial 
exposure substantially similar to a purchase of the FX Base Currency, 
reflecting: (i) The increase or decrease in the exchange rate of the FX 
Base Currency against the United States dollar; and (ii) the yield of 
the FX Base Currency, minus the Fund's fees and expenses.
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    \7\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of adverse market, economic, political or 
other conditions, including extreme volatility or trading halts in 
the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption, or any similar intervening 
circumstance.
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    According to the Registration Statement, each Fund will invest in 
United States dollar denominated short-term debt securities of varying 
maturities and spot foreign exchange contracts in order to seek to 
replicate the daily return of the FX Base Currency. The short-term debt 
securities held by the each Fund generally will consist of high quality 
debt obligations and may include, but are not limited to, obligations 
issued by the U.S. government and its agencies and instrumentalities, 
U.S. municipal variable rate demand notes,\8\ U.S. corporate and 
commercial debt instruments,\9\ and bank notes and similar demand 
deposits. Each Fund's assets also may be invested in short-term debt 
instruments and bank notes and similar demand deposits denominated in 
the FX Base Currency from time to time when the Investment Adviser 
believes these debt securities may help the Fund achieve its investment 
objective. All short-term debt securities acquired by each Fund will be 
rated investment grade by at least one nationally recognized 
statistical rating organization (``NRSRO'') or, if unrated, deemed by 
the Investment Adviser to be of equivalent quality.\10\ Each Fund may 
also invest its assets in money market funds (including funds that are 
managed by the Investment Adviser or one of its affiliates), cash, and 
cash equivalents. All money market securities acquired by each Fund 
will be rated investment grade. The Funds do not intend to invest in 
any unrated money market securities. However, a Fund may do so, to a 
limited extent, such as where a rated money market security becomes 
unrated, if such money market security is determined by the Investment 
Adviser to be of comparable quality.
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    \8\ According to the Exchange, variable rate demand obligations 
(also referred to as variable rate demand notes) are tax-exempt 
obligations that contain a floating or variable interest rate 
adjustment formula and a right of demand on the part of the holder 
thereof to receive payment of the unpaid principal balance plus 
accrued interest upon a short notice period not to exceed seven 
days.
    \9\ Each Fund will invest only in corporate bonds that the 
Investment Adviser deems to be sufficiently liquid at time of 
investment. Generally a non-U.S. corporate bond must have $200 
million (or an equivalent value if denominated in a currency other 
than United States dollars) or more par amount outstanding and 
significant par value traded to be considered as an eligible 
investment, and a U.S. corporate bond must have $100 million (or an 
equivalent value if denominated in a currency other than United 
States dollars) or more par amount outstanding and significant par 
value traded to be considered as an eligible investment.
    \10\ According to the Investment Adviser, the Investment Adviser 
may determine that unrated securities are of ``equivalent quality'' 
based on such credit quality factors that it deems appropriate, 
which may include, among other things, performing an analysis 
similar, to the extent possible, to that performed by an NRSRO when 
rating similar securities and issuers. In making such a 
determination, the Investment Adviser may consider internal analyses 
and risk ratings, third party research and analysis, and other 
sources of information, as deemed appropriate by the Investment 
Adviser.
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    According to the Registration Statement, each Fund generally will 
maintain a weighted average portfolio maturity of between 1 and 30 days 
and generally will be limited to investments with remaining maturities 
of 60 days or less. The Funds will not purchase any security with a 
remaining maturity of more than 397 calendar days.
    According to the Registration Statement, generally, each spot 
foreign exchange contract entered into by each Fund will require such 
Fund to

[[Page 24278]]

purchase from a foreign exchange dealer selected by the Investment 
Adviser, at a specified purchase price expressed in United States 
dollars, a specified amount of the FX Base Currency. Each Fund will 
enter into spot foreign exchange contracts only in the FX Base Currency 
and mainly for the purpose of taking long positions in the FX Base 
Currency. Because the spot foreign exchange contracts entered into by 
each Fund will be spot transactions and typically settle within two 
business days, in order to maintain exposure to the FX Base Currency, 
each Fund will continuously enter into new spot foreign exchange 
contracts by entering into two simultaneous trades.\11\ The Funds will 
not enter into forward foreign exchange contracts. Each Fund is 
classified as ``non-diversified.'' \12\
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    \11\ According to the Exchange, a Fund will maintain exposure to 
its FX Base Currency by entering into two simultaneous trades that 
result in the same open net long position of the FX Base Currency 
with the settlement date extended by one business day. The first 
trade will be an offsetting transaction to the original position 
(which is the long foreign exchange contract that such Fund has 
entered into on the previous day) for the same notional amount and 
same settlement date. This offsetting transaction may cause a Fund 
to realize a gain or loss on the transaction. The second trade will 
be for the same notional amount as the original position with the 
settlement date extended by one business day. Where there is an 
interest rate differential in the overnight ``risk free'' rate 
between the FX Base Currency and the United States dollar, there 
will be a difference in price between the two trades of the 
simultaneous transaction. This difference represents the difference 
in benchmark overnight interest rates between the two currencies in 
the position (i.e., one day of ``carry'' or ``cost of carry'').
    \12\ According to the Exchange, each Fund will be ``non-
diversified'' under the 1940 Act and may invest more of its assets 
in fewer issuers than ``diversified'' funds. The diversification 
standard is set forth in Section 5(b)(1) of the 1940 Act (15 U.S.C. 
80a-5(b)(1)).
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Other Investments

    In addition to the principal investments described above, each Fund 
will invest in other short-term instruments, including other money 
market instruments, on an ongoing basis to provide liquidity or for 
other reasons. While each Fund may invest in money market instruments 
as part of its principal investment strategies, the Investment Adviser 
expects that, under normal circumstances, each Fund also intends to 
invest in money market securities in a manner consistent with its 
investment objective in order to help manage cash flows in and out of 
the Fund, such as in connection with payment of dividends or expenses, 
and to satisfy margin requirements, or to provide collateral.\13\ All 
money market securities acquired by the Funds will be rated investment 
grade. The Funds do not intend to invest in any unrated money market 
securities. However, a Fund may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Investment Adviser to be of 
comparable quality.
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    \13\ For the Funds' purposes, money market securities include: 
short-term, high-quality obligations issued or guaranteed by the 
U.S. Treasury or the agencies or instrumentalities of the U.S. 
government; short-term, high-quality securities issued or guaranteed 
by non-U.S. governments, agencies, and instrumentalities; non-
convertible corporate debt securities with remaining maturities of 
not more than 397 days that satisfy ratings requirements under Rule 
2a-7 of the 1940 Act; repurchase agreements backed by U.S. 
government securities; money market mutual funds; commercial paper; 
U.S. municipal variable rate demand notes; and deposits and other 
obligations of U.S. and non-U.S. banks and financial institutions.
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    Each Fund may hold up to 15% of its net assets in securities that 
are illiquid (calculated at the time of investment), including Rule 
144A Securities. The aggregate value of all of a Fund's illiquid 
securities and Rule 144A Securities shall not exceed 15% of a Fund's 
total assets. Each Fund will monitor its portfolio liquidity on an 
ongoing basis to determine whether, in light of current circumstances, 
an adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of a Fund's net assets are held in illiquid securities.
    A Fund may not concentrate its investments (i.e., invest 25% or 
more of its total assets in the securities of a particular industry or 
industry group), provided that this restriction does not limit a 
Fund's: (i) Investments in its FX Base Currency; (ii) investments in 
securities of other investment companies; (iii) investments in 
securities issued or guaranteed by the U.S. government, its agencies, 
or instrumentalities, certificates of deposit, and bankers' 
acceptances; (iv) investments in repurchase agreements collateralized 
by U.S. government securities; or (v) investments in U.S. municipal 
securities.
    Each Fund intends to qualify as a regulated investment company 
under Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue 
Code. The Funds will not invest in any non-U.S registered equity 
securities and will not invest in options contracts, futures contracts, 
or swap agreements. Each Fund's investments will be consistent with the 
Fund's investment objective and will not be used to enhance leverage.
    Additional information regarding the individual Funds (including 
additional details regarding the underlying FX Base Currencies and 
descriptions of the relevant FX Base Currency spot markets), investment 
strategies, risks, creation and redemption procedures, fees, portfolio 
holdings and disclosure policies, dissemination of key values, 
including NAV, and distributions, among other information, are included 
in the Notice and Registration Statement, as applicable.\14\
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    \14\ See Notice and Registration Statement, supra notes 3 and 5, 
respectively.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \15\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\16\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\17\ which 
requires, among other things, that the Exchange's rules be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission notes that the Shares of each Fund will be 
listed and traded on the Exchange pursuant to the initial and continued 
listing criteria in NYSE Arca Equities Rule 8.600.
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    \15\ 15 U.S.C. 78f.
    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \17\ 17 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\18\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Information regarding 
market price and trading volume of the Shares will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services, and quotation and last-sale 
information for the Shares will be available via the Consolidated Tape 
Association (``CTA'') high-speed line. In addition, intra-day, closing, 
and settlement prices or other

[[Page 24279]]

values of the debt securities, fixed income instruments, and other 
investments held by the Funds are also generally readily available from 
the national securities exchanges trading such securities, automated 
quotation systems, published or other public sources, or on-line 
information services such as Bloomberg or Reuters. Foreign currency 
exchange rates are generally readily available from on-line information 
services such as Bloomberg or Reuters. Each Fund's Portfolio Indicative 
Value (``PIV''), as defined in NYSE Arca Equities Rule 8.600(c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session.\19\ 
On each business day, before commencement of trading in Shares in the 
Core Trading Session on the Exchange, the Funds will disclose on their 
Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 
8.600(c)(2), that will form the basis for each Fund's calculation of 
NAV at the end of the business day.\20\ The NAV for each Fund normally 
will be determined once daily Monday through Friday, generally as of 
the regularly scheduled close of business of the New York Stock 
Exchange (``NYSE'') (normally 4:00 p.m. E.T.), on each day that the 
NYSE is open for trading. The Web site for the Funds will include a 
form of the prospectus for the Fund and additional data relating to NAV 
and other applicable quantitative information. In addition, a basket 
composition file, which will include the security names and share 
quantities, if applicable, required to be delivered in exchange for a 
Fund's Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the NYSE via the 
National Securities Clearing Corporation.
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    \18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \19\ According to the Exchange, several major market data 
vendors display and/or make widely available PIVs published on the 
CTA or other data feeds. The PIV will be based on the current value 
of the securities, spot foreign exchange contracts, and/or cash 
required to be deposited in exchange for Fund Shares. The Exchange 
notes that the PIV will not necessarily reflect the precise 
composition of the current portfolio of securities held by a Fund at 
a particular point in time or the best possible valuation of the 
current portfolio. Therefore, the PIV should not be viewed as a 
``real-time'' update of each Fund's NAV, which is computed only once 
a day. The PIV will be generally determined by using both current 
market quotations and/or price quotations obtained from broker-
dealers that may trade in the portfolio securities and other 
instruments held by the Funds.
    \20\ On a daily basis, the Funds will disclose for each 
portfolio security and other financial instruments the following 
information: ticker symbol (if applicable); name of securities and 
financial instruments; number of shares or dollar value of 
securities and financial instruments held in the portfolio; and 
percentage weighting of the securities and financial instruments in 
the portfolio.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time. Trading in Shares of the Fund will be 
halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable,\21\ and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth additional circumstances 
under which Shares of the Fund may be halted. The Exchange states that 
it has a general policy prohibiting the distribution of material, non-
public information by its employees. Consistent with NYSE Arca Equities 
Rule 8.600(d)(2)(B)(ii), the Reporting Authority must implement and 
maintain, or be subject to, procedures designed to prevent the use and 
dissemination of material, non-public information regarding the actual 
components of the Funds' portfolios. The Investment Adviser has 
implemented a ``fire wall'' with respect to its affiliated broker-
dealers regarding access to information concerning the composition and/
or changes to each Fund's portfolio.\22\ The Commission also notes that 
the Financial Industry Regulatory Authority (``FINRA''), on behalf of 
the Exchange,\23\ will communicate as needed regarding trading in the 
Shares with other markets that are members of the Intermarket 
Surveillance Group (``ISG'') or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, prior to the 
commencement of trading, the Exchange will inform its Equity Trading 
Permit Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares.
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    \21\ These reasons may include: (1) The extent to which trading 
is not occurring in the securities and/or the financial instruments 
composing the Disclosed Portfolio of a Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance 
of a fair and orderly market are present.
    \22\ See note 6, supra and accompanying text. The Commission 
notes that an investment adviser to an open-end fund is required to 
be registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Investment Adviser and its related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above
    \23\ The Exchange states that, while FINRA surveils trading on 
the Exchange pursuant to a regulatory services agreement, the 
Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
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    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances, administered by FINRA on 
behalf of the Exchange, which are designed to detect violations of 
Exchange rules and applicable federal securities laws and that these 
procedures are adequate to properly monitor Exchange trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and applicable federal securities laws.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares in aggregations 
equal to or greater than the relevant Fund's Minimum Subscription Size 
(and that Shares are not individually redeemable); (b) NYSE

[[Page 24280]]

Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its 
Equity Trading Permit Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (c) the risks involved in 
trading the Shares during the Opening and Late Trading Sessions when an 
updated PIV will not be calculated or publicly disseminated; (d) how 
information regarding the PIV is disseminated; (e) the requirement that 
Equity Trading Permit Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (f) trading information.
    (5) For initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act,\24\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \24\ See 17 CFR 240.10A-3.
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    (6) The Funds will not invest in any non-U.S registered equity 
securities. The Funds will not invest in options contracts, futures 
contracts, or swap agreements. Each Fund may hold up to 15% of its net 
assets in securities that are illiquid (calculated at the time of 
investment), including Rule 144A Securities. The aggregate value of all 
of a Fund's illiquid securities and Rule 144A Securities shall not 
exceed 15% of a Fund's total assets.
    (7) All short-term debt and money market securities acquired by the 
Funds will be rated investment grade by at least one NRSRO or, if 
unrated, deemed by the Investment Adviser to be of equivalent quality. 
The Fund will invest only in corporate bonds that the Investment 
Adviser deems to be sufficiently liquid at time of investment. 
Generally a non-U.S. corporate bond must have $200 million (or an 
equivalent value if denominated in a currency other than United States 
dollars) or more par amount outstanding and significant par value 
traded to be considered as an eligible investment, and a U.S. corporate 
bond must have $100 million (or an equivalent value if denominated in a 
currency other than United States dollars) or more par amount 
outstanding and significant par value traded to be considered as an 
eligible investment. In addition, variable rate demand notes purchased 
by the Funds will be backed by a letter of credit provided by a highly 
rated bank or financial institution that meets credit standards deemed 
appropriate by the Investment Adviser. According to the Exchange, the 
Funds will purchase variable rate demand notes with hard one or seven-
day put options, which will increase the liquidity profile within the 
Funds that hold them, since they can be converted to cash within one or 
seven days.
    (8) Each Fund's investments will be consistent with such Fund's 
investment objective and will not be used to enhance leverage.
    (9) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice, and 
the Exchange's description of the Funds.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1 thereto, is consistent with 
Section 6(b)(5) of the Act \25\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \25\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NYSEArca-2013-18), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09626 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P